WILLIAMSVILLE, N.Y. — Tops Holding Corp. here said third-quarter same-store sales and overall profits were down vs. year-ago results, due in part to the conversion of some drugs to generic equivalents and a one-time labor-cost benefit in the 2011 period.
The company, which is parent of the 150-store Tops Friendly Markets chain in New York, Pennsylvania and Vermont, posted net income of $4.7 million for the 12-week period that ended Oct. 6, down about 27% from the year-ago third quarter. Sales were flat at about $538.4 million, and same-store sale, excluding gas, were down 1.3%. The conversion of certain popular drug to generic equivalents has an estimated impact of 75 basis points, or $3.7 million, on same-store sales, the company said.
In addition Tops sold or closed five former Penn Traffic stores in late 2011 and early 2012, which had contributed $3.5 million in sales (excluding gas) during the year-ago period. The recent quarter includes one week of sales from the 21 stores acquired from GU Markets LLC.
Gross profit for the third quarter was $149.9 million, or 27.8% of net sales, down 60 basis points from a year ago, which the company attributed to higher participation in the fuel rewards program and reduced gas margins. Operating expenses declined by about $800,000, to $131.4 million, due to cost containment initiatives and decreased utility costs.
Read more: Tops Launches Free Grocery Promotion
“In the third quarter we executed on many of our initiatives by effectively controlling our expenses and making strategic investments in store upgrades to improve the customer experience,” said Frank Curci, Tops president and chief executive officer, in a statement. “We also continued to drive customer loyalty with our gas rewards program which saw a measurable increase in participation.”
Operating income for the third quarter was $18.4 million, or 3.4% of net sales, down from $20.7 million, or 3.9% of net sales, in the prior-year period. The company experienced a $2.4 million reduction in expenses in the year-ago quarter after an adjustment related to a labor contract.
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